The Valuation of Movie Theater Operations

Project Description

This edition will be a resource of tremendous value. The book penetrates the movie industry’s
mystique and empowers you by revealing, in layman’s terms, the techniques for valuing theater
businesses and their assets. No other book on the market covers all of these issues in one source.
It is packed with spreadsheets, examples, forms and checklists which really work. The knowledge
you will gain from this book is powerful and explains important terms and concepts clearly.

Here you will easily understand not only how to value, sell or purchase any theater but also discover:

  • Movie Distribution Channels
  • Construction Trends in Theaters
  • How Film Distribution, Negotiations and Licensing Really Work
  • Film Licensing & Pricing Formulas
  • The Nuances of a Theater’s Revenue Streams and Expenses
  • How to Analyze a Theater’s Financial Statements
  • Compare a Theater’s Ratios to the Industry
  • Theater Valuation Rules of Thumb
  • Analyzing Cash Flows for Single Operations versus Multiple Location Theaters
  • How IMAX, Mega and Multi-Plex Theaters Differ in Facilities
  • Valuing the Real Estate of Theaters and the Nuances which can Drastically Affect Value
  • How many Screens and Seats should a Theater have?
  • What Changes are Likely to Happen in the next Five to Eight Years
  • Typical Equipment for Various Theaters
  • How the Equipment can Make or Break an Operation
  • Understanding Auditorium Layouts, Sound and Projection Systems
  • Typical Installation Costs for New Theaters
  • Business Acquisition Rates of Return
  • Real Estate Cap Rates for Various Theater Types

This book is the only one of its kind which describes the valuation of a Movie Theater’s Business, Real Estate and Equipment.

Chapter 1 is an Overview of the industry and provides a comprehensive overview of the theater industry and the rapid changes which are taking place in this industry. This chapter focuses on the History, Trends, Movie Theater Demand, Supply of Quality First Run Films, Current Renovation Trends of Facilities, Movie Distribution Channels, Film Negotiations and Licensing Competition, Revenue Streams in Relation to DVDs, Risks in the Industry and the Regulatory Environment of the Industry.

Chapter 2 walks you through Analyzing a Theater’s Financial Statements & Operations. In this chapter the reader is provided a primer on basic financial statement ratio analysis, and an overview of adjustments for extraordinary and nonrecurring items. Although not as critical for larger businesses, these adjustments are crucial to understand when valuing closely held businesses. These are discussed in Adjustments for Extraordinary and Nonrecurring Items on page 82. Finally, the addendum presents an invaluable Checklist of Important Items for Theater Valuations on page 87.

Chapter 3 provides a Summary of Business Valuation Approaches. This chapter presents a summary of the various approaches to valuing a business. More importantly it presents an overview of which valuation technique is most useful when comparing the values during a reconciliation.

Chapter 4 discusses Business Valuation (Adjusted Book Value or Cost Approach). One of the most basic approaches to valuing a business is by looking at the balance sheet. It is difficult to accurately adjust the balance sheet assets and liabilities to market values. This section focuses on the adjustments and nuances of making each adjustment.

Chapter 5 discusses Business Valuation (Market Approach). Chapter 5 presents one of the most typically used methods for establishing the value of a theater business. The market approach is used frequently, because it is the easiest technique to understand. Most people understand multiples from the stock market as well as rules of thumb. This chapter presents the advantages and drawbacks, and dangers of using rules of thumb.

Chapter 6 discusses Business Valuation (Income Approach). This chapter is one of the most important chapters in the book. All decisions are based upon cash flow, the most critical element to a theater s business value. This chapter presents an overview of the different models used (cash flow to equity and to the firm), how to calculate discount rates, as well as the various assumptions which are needed to calculate a value. Finally, an excellent example of two different models is presented in Table 6-11 on page 150 and in Table 6-16 on page 156.

Chapter 7 provides a good overview of Asset Valuation (Real Estate). Real estate may sometimes constitute the largest component within the fixed asset category on a balance sheet. This chapter gives a critical primer in what to look for when analyzing the real estate asset or lease. This chapter addresses the different types of movie theaters, the leases, and typical methods of valuing the asset.

Chapter 8 provides a good overview of Theater Asset Valuation (Equipment). Every business is sold with equipment. However, knowing how much the machinery and equipment are worth will assist the purchaser in determining the amount of goodwill that a buyer would pay for as part of the overall purchase price. These assets are different from real estate and intangibles, because their values can differ depending upon the specific circumstances under which they are being sold, e.g., liquidation value, going concern value. The Appendix presents all of the major references used with their addresses and telephone numbers.

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Project Details

April 23rd, 2015
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Frazier Capital Valuation provides appraisal services in the disciplines of business valuation, commercial real estate, and equipment.

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